Did You Know...

You can’t pick up a newspaper in any part of the country without reading yet another sob story about a “poor” homeowner suffering through the subprime crisis. Well-off suburbs are clamoring for help –and wealthy homeowners are now being cast in news articles as “victims,” too.

All this media attention, but who’s giving voice to responsible taxpayers and housing industry experts who oppose the bailout bandwagon? Here’s a sample of letters I’ve received in response to my “Suck It Up” column this week.

GOP presidential candidates, are you listening?
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Dear Ms. Malkin,

I describe myself as a social liberal and fiscal conservative, so I’m not sure which political “label” applies to me…but I read your article regarding the so-called “mortgage crisis” tonight and thought, “Right on!” I live in Seattle, which is a pretty pricey city to purchase a home in. Therefore, when I decided to buy a home two years ago I decided to sacrifice a suburban McMansion and buy an urban fixer-upper on a very busy street because that’s all I could qualify for under a traditional 30 year fixed mortgage (not to say that banks didn’t try to pressure me that I could “afford” much more using an adjustible rate mortgage). Flash forward to the present and I’m stuck at work listening to my coworkers (who make as much as I do) screaming about how they were duped into buying their $600,000 home and now they’re shocked (shocked!) that their take-home pay won’t cover their rapidly increasing mortgage payment. The not-so-subtle translation is: where’s my bailout?

I’m sure that those of us who actually did the math and bought what they could afford will be left, in my case, listening to traffic roar by as the federal government rushes to protect the poor, misguided folk who sit in their four bedroom homes in their nice, quiet neighborhoods. But it’s a nice consolation to read a national columnist who speaks for the rest of us who would otherwise be left to feel like some sort of monster for not immediately reaching for our wallets to pay for someone else’s “American Dream.”

Thank you for the article!
Andrew

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Michelle,

I’ve been following your coverage on the “housing crisis” and thought I’d add a quick thought. I was very tempted a couple years ago to use an ARM to buy a house for myself, especially after hearing the majority of my friends advocating how cheap it was. After doing some research, I realized that I wouldn’t be able to afford the potential rate increases. So, I am still in an apartment, waiting to save up some more for my future house. I’m trying to figure out why people that make just as much as I do will be able to keep houses they can’t afford, while I will get to stay in an apartment, for the simple reason that I did my due diligence. And I’m not even going to bring up the fact that it looks like my tax money will go to helping them out even more. Once again, responsible people are punished by the government.

Ben Dillon

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Well said Michelle. I am a real estate developer on the Gulf Coast. The real estate speculation and insanity from late 2004 through the beginning of 2006 is now adversely affecting me and those in the ‘subprime crisis’. I don’t want the government’s help, and I don’t want the government bailing out people who either used their home as a credit card or bought more house than they knew they could afford. Government assistance would certainly keep more people buying lots and houses. However, the party is over for now, and it is time to pay the bar tab and the caterer. There comes a time when everyone, including the government, needs to come home from vacation, get to work, and pay their bills.

Investors that bought and hold the subprime and adjustable mortgages don’t want to own several hundred thousand foreclosed houses. They will renegotiate with the mortgagors to get to terms that allow the homeowner to continue to pay the note. Mortgage holders aren’t going to do anything if they think the government is going to pay the note. Let free markets work.

Homebuilders and developers alike need to get realistic with the value of property. We all knew it was ridiculous a couple of years ago. Some homebuyers paid too much for their house. It will work its way out and the values will come back up. They need to sit tight, and if possible, pay a little extra on the mortgage. Some people refinanced and used their home as a credit card. It is time to pay the bill. It is that simple.

–Tucker

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Michelle,

My husband and I patiently sat back and watched while our friends made a killing in real estate over the past six years. We decided to focus on our careers in New York City and pay sky-high rent, convinced that the housing prices were artificially high and that this was a housing bubble. Now after several years, we are ready to move to the ‘burbs, and we feel it is responsible people like us who are going to get hurt by this mortgage mess.

We are the ones who will have more pricey mortgages because the lenders will transfer the cost of revising the terms of these loans, after the fact and through government coercion, to us.

We’re the ones who have to sit back and wait for housing prices to fall, while our government, looking to protect only the home owners, keeps prices artifically high with bailout programs and artifically low interest rates.

What about programs to help out renters who didn’t make any money in this bubble, because we were responsible? What about government intervention to lower the still-high housing prices so we aren’t locked out of the market? A natural correction in the housing market is in order, but the government seems hell bent to prevent it from taking place. In the meantime, we are priced out of the market because we aren’t willing to get in over our heads financially (unlike some of these revered home owners).

A.W. in NYC

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I spent 25 years of my working life in the mortgage business thus I can tell you this crisis would not have happened on the ground without collusion by at least two of the following three parties (and there can be more parties involved): loan officer, real estate agent and borrower-and believe me, it is possible for the borrower NOT to know about what happened in his/her name. They can be told they qualify for the $250,000 home the agent has listed when in fact they can only qualify and barely for 150,000). Though most of them have at least a general idea of what is going on in their name, some really do not, and if they do, they just do not care, they want what they want and that is it. In fact, the problem is NOBODY cares as long as they get paid and nobody gets caught.

An example of how it can work: Agent takes a borrower to see homes and borrower loves the $250,000 home above all others. Agent calls his/her favorite (read gets loans done) loan officer. Let’s keep real here and say borrower has been pre-qualified by a or same loan officer for $150,000. Agent makes commission on the $250,000, loan officer makes more money on higher loan amount and borrower gets what he wants.

I used to be asked by agents (and borrowers). “theoretically, to purchase a $250,000 home with say, minimum down, how much would a borrower need to make to qualify?” See how it goes? Then the income/asset/program whatever is tailored to the transaction, Custom tailored, so to speak. Fraud city for sure! Now, most of the time or until the last few years it was within some bounds. But the last several years with stated income, stated asset and no income no asset loans the lid has blown off and now we reap what we (collectively) have all sown.

I am really grateful got out of the business 3+ years ago. it is a mess.

— Rose

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Michele:

I read your column often and today you nailed the problem in the mortgage industry. I am a loan originator in Upstate NY and am increasingly frustrated with the lack of understanding of what has happened in the mortgage industry. For sure, there are many loan brokers and bankers who carry a share of the blame, but the biggest problem are the people who wanted to purchase a home that they really couldn’t afford and relied on creative financing. If you could see the endless amount of disclosures and paperwork that a borrower is required to sign and both the mortgage application process and at closing, it is laughable to think that, as Senator Obama suggests, these people had no understanding of what they were entering into. Thank you for your insight.